A review of various economic indicators shows that both the recent food crisis and the financial and economic crisis have had significant negative effects on the Central American countries. The first jolt to the region came in 2007 and mid-2008, while the second occurred at the end of 2008 and in 2009. Particularly notable during 2007 and the first half of 2008 was the inflation that hit the food and beverage sector, which consistently outpaced overall inflation in Central America. The rise in prices coincided with the upward trend in international prices for the main agricultural commodities. The impact of the financial and economic crisis was reflected in declining exports, particularly for the maquila industry, reduced tourist inflows, a decrease in remittances from abroad, and a decline in flows of foreign direct investment (FDI) to the region. These factors, in combination, contributed to a contraction of economic activity in Central America in 2009.
This brief analyzes the impact of both crises on urban households using both quantitative and qualitative methods for four Central American countries: El Salvador, Guatemala, Honduras, and Nicaragua. First, behavior of different economic aggregates in the region’s countries during the period examined and the potential implications for households are examined. This section is followed by a simulation analysis of the effects of the food price crisis on the well-being and poverty rates of urban households. The final section presents findings from an in-depth qualitative analysis of focus group material on the impact of the food and financial and economic crises, collected between the end of 2009 and the beginning of 2010 from a diverse sample of the urban populations in these four countries. The qualitative nature of this analysis provides for a more detailed understanding, from a microeconomic perspective, of how households in the region dealt with the crises.